Monthly Archives: November 2017

I don’t think it’s about simply owning a house. It’s about an entire package.

We Americans, traditionally, want a stable home life, one that we create for ourselves through hard work. That includes a loving family and a place that we think of as home. Having ownership means that we’ve established ourselves.

Millennials, generally speaking, haven’t achieved this dream yet, for a few reasons. But they still want it.

Research from Gallup reports that 86% of Americans ages 18 to 34, basically the Millennials, want to get married someday. Unfortunately, in 2014, only 27% of them were married. According to the Census Bureau, 36% of Gen-Xers and 48% of Baby Boomers were married at that age.

And Millennials—despite the stereotypes that exist of them to the contrary (like living only to post pictures of themselves on Instagram)—want kids. In 2013, 87% of those 18 to 40 without children said they wanted to have kids someday.

This leaves us with one piece of the American Dream puzzle to discuss: a home.

We know people would rather own than rent. The Urban Institute noted that 81% of renters would rather purchase a home but don’t think they have the means. The biggest reasons cited for not buying were affordability and qualifying for a loan.

Money plays a part in each of these big life decisions: when to marry, when to have kids, and when to buy a home.

It’s easy to say that few people have enough money when they’re young to feel comfortable getting married or having kids but that they should do it anyway. But, when buying a home, the situation is a bit more tangible. You must have the money or you simply don’t get a house.

It’s Hard for the First-Time Buyer

Today, the typical first-time homebuyer is 31 years old. Rising numbers of this group will reach age 31 through 2026. We’re halfway through what should be a booming new-home market, and yet sales remain stuck near recession levels.

New single-family home sales touched almost 1.4 million units per year in the housing boom. Clearly that was a bubble. After it burst, sales dropped to less than 300,000 per year, the lowest level of new home sales on record.

We’re recovered to just over 600,000 per year, but that’s less than the average number of units sold during the 1980s and 1990s. The National Association of Home Builders (NAHB) estimates we need about one million new homes a year to meet demand.

In this context—young people want to buy homes, and there are more people of the age to buy new homes than at any time since the Boomers came of age in the 1980s and 1990s—builders should be falling all over themselves to build homes that cost around $200,000.

A family earning $65,000 to $70,000 per year—the median income of a household aged 31 to 34 was $65,768 last year—could afford units near that price. And yet that scenario isn’t playing out.

Instead, builders focus on homes between $300,000 to $400,000. The median home price in the U.S.is $306,000. Since 2011, the number of affordable units priced under $200,000 continued to fall. And, in 2014, builders started constructing more expensive homes than affordable units.

It looks like builders are ignoring their biggest opportunity: selling first homes to the growing market of Millennials as they reach the prime, first-time homebuyer age of 31.

It doesn’t make sense. No retailer would willingly ignore a growing potential customer base, resigning his or herself to selling 60% of what the market would bear. There has to be a reason.

The Costs of Building Homes

It turns out that builders have the same problem as their young clients: money. They simply can’t afford to price a home so low. Builders are bumping up against the reality of higher costs for regulation, land, and construction.

Not to be left out, builders are charging a bit more, meaning they’re earning higher profits. In 2011, clearly a difficult time for the industry, the average profit was 6.8%. In 2016 the percentage rose to 9%.

With fewer than 100,000 new homes priced at or below $200,000 built in 2016, it’s obvious that many would-be-first-time-homebuyers are out of luck.

The New Buyer Profile

Last year, 17% of first-time homebuyers—of both existing and new homes—financed 100% of the purchase price. That’s almost one in five borrowers who have no skin in the game; no equity built up.

An additional 29% of the first-time buyers put down less than 5% of the purchase price, and another 15% put down less than 10%.

All told, 61% of first-time buyers put down less than 10% on their homes.

That’s a shockingly large number of homeowners with very little equity. But the dollars aren’t so small. At today’s median price, a new-home buyer would need more than $60,000 to put down 20%. That’s a big chunk of cash, especially for a young couple buying their first home. Even at 10% they’d need over $30,000.

With prices so high, it’s easy to see why they choose alternative financing methods—just like I did way back with the FHA—to get their feet in the door. The difference is that my downside was miniscule. Still, you do what you have to do.

And we want Millennials to buy homes, because it works out better for the broader economy.

A Supercharge Waiting to Happen

Homeowners who buy a newly constructed home typically spend $4,500 more in their first two years in the new house than their non-moving homeowner counterparts do in the same period. For those that buy an existing home instead of a newly built unit, the difference is $4,000.

Those buying new homes spend the money on appliances and furniture, whereas those buying existing homes spend less on those items but more on repairs and renovations. All these purchases spur economic activity, which boosts GDP.

And, to become homeowners in the first place, these young buyers borrow a lot of money.

To fund operations, those lenders issue bonds, which end up in the portfolios of pension funds, insurance companies, and mutual funds. The home-buying process, particularly for young first-timers, supercharges the economy through credit creation, giving the buyers the capital needed for the transaction and providing investors with the long-term debt needed to meet their financial goals.

It’s a win-win. That’s just on the buying half of the equation. Moving to the selling side, home building boosts GDP and employment.

Residential homebuilding as a share of GDP usually fluctuates between 4% and 5%. During the housing boom of the mid-2000s, it jumped to almost 7% of GDP, but then it fell to an all-time low of 2.4% in 2012.

The problem is that homebuilding’s share of the economy hasn’t rebounded very much, sitting now at 3.8% of the GDP. That’s the same level reached during the recessions of the early 1980s and early 1990s. And this comes after five years of rising home prices and nine years of economic expansion!

The same trend is playing out in employment. Building a home takes a lot of labor, including carpenters, electricians, plumbers, roofers and other workers.

Residential home building employment has only recently climbed back to the lowest level of the recession of the early 1990s.

Homebuilders claim they need more workers, a situation exacerbated by the hurricanes we saw in Texas and Florida in late August and early September. Before Hurricane Harvey, the U.S. had an estimated shortfall of 228,000 construction workers. But numbers like that always strike me as a bit disingenuous.

Can it be true that contractors are willing to hire an additional quarter million people but no one wants those jobs? I think the reality is a bit different. It’s not that people aren’t available. It’s that we have a skills gap that no one is willing to pay to close.

Contractors lament a lack of workers with specific skills, but where are the training programs for those skills? When housing fell off a cliff in the late 2000s, not only did skilled workers leave the field, but new workers stayed away.

To rebuild the labor force, someone has to train the new hires. If builders have such a shortage, they can use some of their increased profits to train the next generation of workers. So far they seem unwilling.

The situation boils down to cost. With rising land, labor, construction material, and regulatory costs, builders can’t construct homes that most young, first-time homebuyers can afford, which means slower family formation among the Millennials compared to previous generations.

When this integral piece of our economic pie doesn’t grow, it drags on the entire economy.

With fewer new homes on the market at affordable price points for young, first-time homebuyers, more of them will most likely turn to existing homes.

With a limited supply of homes within a manageable commuter distance of major urban areas, this market won’t give the economy the same economic boost as new homes. But it does give Millennials a way to make progress toward the American Dream. And it also increases spending on renovation and repairs. This market has become a staple of everyday life, with real estate-flipping shows clogging the airways, outlining how do-it-yourself homeowners can dramatically improve their property on modest budgets.

Where did the year go? I’m glad it’s Thanksgiving, though. It’s my favorite holiday; a feast of food and a great family gathering. No religion, just a lot of good eats and family togetherness.

We’re reminded regularly of the age-old Thanksgiving story.

Most classroom materials portray Native Americans at the historic first Thanksgiving as supporting players. They are depicted as nameless, faceless, generic “Indians” who shared a meal with the bold and gallant pilgrims.

The real story is much deeper and far more nuanced.

The Indians in attendance were Wampanoag, a people with a sophisticated society who had occupied the region for thousands of years. They had their own government, their own religious and philosophical beliefs, their own knowledge system, and their own culture. They were also a people for whom giving thanks was a part of daily life.

The quintessential Thanksgiving feast of turkey, cranberry sauce, and mashed potatoes (foods we still enjoy today!) would not exist if not for the knowledge and ingenuity of the Wampanoag and other native people of the Americas.

And unlike the image of the first Thanksgiving as a friendly gathering of two diverse groups trying to understand each other’s cultures, the assembly of these people had much more to do with political alliances and diplomacy.

It’s a much different story than the idyllic scene depicted in countless texts and tales, but it tells us so much more about the event, and helps us understand the significance of this gathering far beyond eating turkey on the fourth Thursday of November.

Unfortunately, for centuries, history books and popular culture have separated Native American history from “American History.” Native people who helped shape our country are recognized today as little more than car model names and team mascots.

But what do we really know about native people? How much have you been told about Chief Joseph, Geronimo, Sitting Bull or any of the other important leadership figures in Native American history.

Chief Joseph, 1841-1904, Nez Perce Leader

A powerful orator and advocate for his people’s right to remain on their homelands in Oregon’s Wallowa Valley, Chief Joseph is best known for leading his people on an epic four-month-long flight toward freedom through some of the most difficult terrain in the American West. In 1877, Chief Joseph’s people were given 30 days’ notice to relocate to an Idaho reservation—an order that precipitated the Nez Perce War, in which Chief Joseph led 300 warriors and 500 women and children in a guerilla campaign that eluded pursuing U.S. troops over 1,300 miles. Hungry, cold, and outnumbered, the New Perce surrendered, 40 miles shy of the Canadian border and freedom. After being held prisoner in Kansas—where five of his children died of disease—Chief Joseph became a tireless and well-publicized champion for his people’s right to return to their homelands. Chief Joseph was never allowed to return home. He died in 1904 at the Colville Reservation, in Washington State.

Sitting Bull was a stalwart defender of his people’s lands and lifeways, which were threatened by the intrusion of white settlers and miners on treaty-guaranteed tribal territories, and by U.S. government efforts to concentrate Indians on reservations. These violations provoked war in 1876, in which Sitting Bull and other war leaders masterminded the defeat of U.S. troops at the Battle of the Little Bighorn. Faced by a massive U.S. military counteroffensive, Sitting Bull and his 4,000 followers fled to Canada, but returned in 1881. After two years as a prisoner of war, Sitting Bull settled on the Standing Rock Reservation in present-day North Dakota, where he became a successful farmer, and later toured with Buffalo Bill’s Wild West Show. Yet he remained a staunch critic of U.S. Indian policy, and became an apostle of the Ghost Dance—an Indian religious revival movement, which spooked white officials at the Standing Rock Reservation. In 1890, Indian police stormed his cabin, sparking a bloody shootout in which Sitting Bull was killed.

Geronimo, 1829-1909, Apache Leader

A symbol of Native American resistance and warrior spirit, Geronimo acquired a reputation as a fearless fighter while wreaking vengeance on Mexican troops who had murdered his wife, children, and mother. When U.S. miners, settlers, and soldiers intruded on Chiricahua Apache lands in Arizona, Geronimo and his people resisted the newcomers, rejected U.S. efforts to settle his people on reservations, and were denounced as murderous renegades by angry whites. Hunted relentlessly by U.S. soldiers and Apache scouts, Geronimo was finally persuaded to surrender in 1886, and was shipped as a prisoner of war to internment camps in Florida, Alabama, and finally Fort Sill, Oklahoma. In his later years, Geronimo converted to Christianity, sold autographed photos of himself, and rode in President Theodore Roosevelt’s inaugural parade. Despite his notoriety, the old warrior was never allowed to return to his tribal homeland. He died a prisoner of war at Fort Sill in 1909. Geronimo’s legend as a warrior survived. Today he is remembered as one of the greatest symbols of Native American resistance in the history of the United States.

The National Museum of the American Indian stands proudly as an active and visible part of the Smithsonian Institution, the world’s largest museum complex. The flagship museum is located on the National Mall, just steps away from the U.S. Capitol. Opened in 2004, this facility was imagined and constructed with extensive input from Native communities.

The National Museum of the American Indian tells this story—and much more. Here people will learn…

How the worst pandemic in human history killed perhaps 90% of the indigenous population.

How Native societies developed a complex system of hand signals that foreshadowed modern sign language.

How Native gold, silver, land, and labor, made Europe rich and changed world history.

How many individuals today have Indian ancestry.

How Native people have not gone away. They are a large presence in our society and continue to influence and shape our shared story.

Most of all, the museum shows visitors that no matter what your personal background or heritage, Native history and culture has affected your life.

Over the last few weeks the news has been full of the story of the three UCLA freshmen basketball players who arrived in Hangzhon, China and spent their first free time to do some shoplifting at three upscale stores near their upgraded hotel.

If was, of course, dumb, stupid and embarrassing to the guilty wichins, to UCLA and to the United States.

They continued their stay at the team hotel until they were allowed to leave after the presidents of both countries agreed to let UCLA mete out the punishments and avoid a potential international incident.

China is not a soft or codling overseer. They just announced three-year prison terms for anyone who discredits the flag or the National Anthem.

Appearing at a UCLA news conference on November 15th, each read a prepared statement of contrition and remorse, as UCLA announced an “indefinite suspension.”

Coach Steve Alford said they would have to earn their way back as players. The exact terms of the suspension were apparently still being worked out with the school’s Office of Student Conduct.

The news conference ended without any questions from reporters.

The general fan and public reaction seems with little variance to be pretty tough; take away their scholarships, expel them or at least suspend them for one year. Almost anything short of the firing squad!

The second opinion was voiced by Bill Plaschke, senior sports columnist and the L.A. Times editors, who said, “UCLA missed a chance to make bold statement with the three players.” It was Plaschke who said, “It was a tepid announcement of punishment. The Times editorial said, “UCLA cannot be too quick to forgive and forget. The players should be suspended from the team for the season at a minimum.”

The Times editorial went on to say, “UCLA needs to send an unequivocal message to the athletes and the campus as a whole that violating the law while representing the university will not be tolerated.”

Now a third, somewhat nuanced opinion from Julie Wilhoit, a 30-year former college coach.

She said, “The job of a coach is to teach the fundamentals of a sport, instill a sense of team sport and sportsmanship and more than that it is to help students get an education and grow into mature, responsible citizens.”

“I think,” Wilhoit said, “the indefinite suspension was the right course of action. The terms when finalized will probably include:

Attend all classes and sit in the front row;

Serve X days of community service;

Visit a juvenile facility one or more times;

Be a half-hour early for all practices;

Be consummate team and cooperative players.

Our collective responsibility is to help re-educate these misguided young men and assist in their growth and maturation.

“Any misstep,” the coach said, “should be grounds for expulsion.”

This certainly sounds like a reasoned and appropriate approach. It might have helped if they gave all the details of the suspension at the announcement.

There are, of course, some remaining questions:

Can the players attend games, even if they can’t sit on the bench?

Will one or more of the three opt out for another school?

None of the three were slated to be starters. It will be interesting to see how this evolves.

What is this world coming to? In a recent New York Times column, David Brooks opines that politics in the hiring process is now more pervasive than racial discrimination. How can that possibly be?

In his column, Brooks backs up his claim by referencing several sources, including political scientists Shanto Iyengar and Sean Westwood, who gave 1,000 people student resumes and asked them which students should get scholarships. The resumes had some racial cues (membership in African-American Students Association) and some political cues (member of Young Republicans).

Race definitely influenced decisions. Blacks favored black students 73 to 27 percent, and whites favored black students slightly. But political cues were more powerful. Both Democrats and Republicans favored students who agreed with them 80 percent of the time. They favored students from their party even when other students had better credentials.

Iyengar and Westwood conducted other experiments to measure what Cass Sunstein of Harvard Law School calls “partyism.” They gave subjects implicit association tests, which measure whether people associate different qualities with positive or negative emotions. They had people play the trust game, which measures how much people are willing to trust different kinds of people.

In those situations, they found pervasive prejudice. And political biases were stronger than their racial biases.

In a Bloomberg View column, Sunstein pointed to polling data that captured the same phenomenon In 1960, roughly five percent of Republicans and Democrats said they’d be “displeased” if their child married someone from the other party. By 2010, 49 percent of Republicans and 33 percent of Democrats said they would mind.

Politics is obviously a passionate activity, in which moral values clash. Debates over Obamacare, charter schools or whether the United States should intervene in Syria stir serious disagreements. But these studies are measuring something different. People’s essential worth is being measured by a political label: whether they should be hired, married, trusted or discriminated against.

The broad social phenomenon is that as personal life is being demoralized, political life is being hyper-moralized. People are less judgmental about different lifestyles, but they are more judgmental about policy labels.

The features of the hyper-moralized mind-set are all around. More people are building their communal and social identities around political labels. Your political label becomes the prerequisite for membership in your social set.

Politics becomes a marker for basic decency. Those who are not members of the right party are deemed to lack basic compassion, or basic loyalty to country.

There are several reasons politics has become hyper-moralized in this way. And straight moral discussion has atrophied. There used to be public theologians and philosophers who discussed moral issues directly. That kind of public intellectual is no longer prominent, so moral discussion is now done under the guise of policy disagreements, often by political talk-show hosts.

Back in the day when I was hiring, I desperately looked for any kind of spark, a passion or a commitment. I didn’t care whether it was politics, religion, a hobby—anything which said to me this person has potential.

Trying to uncover that spark was not always easy, so I was happy, delighted to find it in whatever politics a candidate pursued.

If we believe David Brooks, that’s just not good enough anymore. It has to be the “right” politics.

Ugh, that’s discouraging! I wasn’t in favor of race being a factor in hiring and I’m no less comfortable with politics now being a source of discrimination.

Sir, I have a bit of a bone to pick with you about your recent comments during the confirmation hearing for Secretary of Education nominee Betsy DeVos. I hope you’ll kindly indulge me for just a moment to correct you on some of the things you said and perhaps more importantly, things you left out, during your time with the microphone.

You basically took it upon yourself to condemn Indiana’s school choice program on a national stage. But I live in Indiana. I’m a mom. And I’ve exercised school choice in Indiana. And I must say, you got a lot wrong, Senator. You should really speak to your staff about that.

Here’s what you said:

“Basically what was happening is we were taking money from poor kids needing resources and giving it to middle class kids to continue going to religious school.”

This statement is proof that you either do not understand school funding or made the choice to deliberately mislead the public. If, as you claim, the children are middle class children from the suburbs, then their per pupil dollars would reduce the money at their suburban schools, not the urban schools you claim are losing all the money.

And perhaps even more glaring is that you totally failed to mention that Indiana’s poor and minority children have been under-educated for decades. And for generations. This is precisely why school choice came to be in Indiana. I have two children graduating in a little over a year and when they started high school every Indianapolis Public school had a D or F rating.

Would you, Mr. Franken, put your child in a school with a D or F rating? Would you expect your friends or Senate colleagues to put their children in a school with a D or F rating?

We all know the answer, sir, because your children attended a school that costs more than $40,000 per year, a school known for educating celebrities and the children of royalty. Literally, people who wear crowns on their heads.

Here’s an excerpt to help you see your own hypocrisy, in case you missed it:

“Minnesota Sen. Al Franken’s two children attend Dalton School, described by the liberal-leaning Daily Beast as “one of New York’s most exclusive and rigorous private schools and boasts an impressive roster of celebrity alumni, including Anderson Cooper and Clair Danes.” Dalton’s application asks parents to list any prestigious titles they told, including, “Princess, Senator and Ambassador,” according to The Daily Beast.

“Franken describes Dalton as “a very high-powered, expensive New York City private high school.” How expensive? Dalton’s tuition is currently $44,640 a year.”

So, Senator, with due respect, you really don’t have much standing to criticize Indiana’s school choice program while ignoring the fact that urban school districts were failing to provide quality education long before charter schools or vouchers were even a thing. Year after year, the people of Indiana have been paying taxes to a system that has under-educated an entire generation while at the same time, they’ve watched crime and incarceration in these same neighborhoods increase.

I suppose I’m somehow misguided in your mind, Mr. Senator, for not giving the D and F schools in my zip code a chance with my children. Is that because I never worked for Saturday Night Live, because I’m black, because I’m not part of the Who’s Who of American high society? I guess you think it’s okay that without school choice, I would have been obligated to send my children to lousy schools.

If your issue is that not enough families have access to quality education, then we agree. I have spent years adjusting my work schedule and jumping through logistical hoops to make the school choice thing work. So I agree that lawmakers need to make vouchers and charter schools more accessible to more families in Indiana.

My question to you, Senator Franken, is how in the world have you and those before you been willing and able to sit by while black and brown and poor children have been trapped in underperforming schools? Whether in your state of Minnesota or my state of Indiana, there is an injustice right before your eyes that you are ignoring. I assume you realize that the fancy Dalton School you are used to isn’t really what school is like for regular Americans like me. I certainly hope you realize that.

Sir, we need you to fix the problem, not lecture us from your high perch about how you don’t agree with us being allowed to have options.

My family is a choice family. We are not anti public school; on the contrary, we are pro quality education no matter where it exists. And while I am pleased to see improvements in the Indianapolis Public Schools, it has come too late for my children. So I am most grateful to have been able to educate my children at a high quality Christian school that has prepared them in content and character. I’ll bet that the Dalton school prepared your children in lots of ways that make you grateful and proud.

Senator Franken, I realize that you have wealth and this all may be an exercise in pretending to solve problems that won’t ever affect you. But this is my life. And my kids.

So please work harder to get it right. We know you love jokes. But this is serious business and so far, you are getting it wrong.

Change is part of human life. Our world is constantly changing and evolving to fit our needs and to keep up with technology. In years past, we have seen the typewriter replaced by the computer and the clothes line replaced by dryers. Not everything has been completely replaced though; many things have been updated such as a wooden box camera to a digital camera. Those who adapt to the change will be the ones to thrive in the changing world. All others will be left behind. Here are 12 guesses on the next things that will disappear in our lifetime:

The Check – Britain is already laying the groundwork to do away with checks by 2018. It costs the financial system billions of dollars a year to process checks. Plastic cards and online transactions will lead to the eventual demise of the check. The result of this means less mail traffic and the post office will suffer.

The Post Office – Get ready to imagine a world without the post office. They are so deeply in financial trouble that there is probably no way to sustain it long term. Emails and companies like FedEx and UPS have just about wiped out the minimum revenue needed to keep the post office alive. Most of your mail every day is junk mail and bills.

The Newspaper – The younger generation simply doesn’t read the newspaper. They certainly don’t subscribe to a daily delivered print edition. As for reading the paper online, get ready to pay for it. The rise in mobile internet devices and e-readers has caused all the newspaper and magazine publishers to form an alliance, but it’s not stopping the decline.

The Book – You say you will never give up the physical book that you hold in your hands and turn the literal pages, but you will. You can browse a bookstore online and even read a preview chapter before you buy and the price is less than half that of a real book. Another convenience is not lugging around a stack of heavy books.

The Land-Line Telephone – Unless you have a large family and make a lot of local calls, you don’t need it anymore. Most people keep it simply because they’ve always had it. For the extra service, you’re paying double. All the cell phone companies will let you call customers using the same cell provider for free.

Corporate Music – The music industry is dying a slow death. Not just because of illegal downloading. It’s the lack of innovative new music being given a chance to get to the people who would like to hear it. Opportunities on the internet such as online radios and websites like Pandora allow people to listen for free and reach the masses directly without a company.

Network Television – Revenues to the networks are down dramatically. Not just because of the economy. People are watching TV and movies streamed from their computers. And they’re playing games and doing lots of other things that take up the time that used to be spent watching TV. Cable rates are skyrocketing and commercials run about every four minutes. People will choose what they want to watch online and through companies like Netflix.

Personal Files – Today your computer has a hard drive and you store your pictures, music, movies and documents. Your software is on a CD, and you can always re-install it if need be. Apple, Microsoft and Google are all finishing up their latest “cloud services.” That means that when you turn on a computer, the internet will be built into the operating system. If you click on an icon, it will open something in the internet cloud. In this virtual world, you can access your music or your books, or your whatever from any laptop or handheld device.

Privacy – If there ever was a concept that we can look back on nostalgically, it will be privacy. That’s gone. It’s been gone for a long time anyway. There are cameras on the street, in most of the buildings, and even built into your computer and cell phone. But you can be sure that 24/7, “they” know who you are and where you are, right down to the GPS coordinates, and the Google Street View. If you buy something, your habit is put into a zillion profiles, and your ads will change to reflect those habits. “They” will try to get you to buy something else. Again and again. You know who “they” are!

Fax Machine – Ever since the introduction of email, the fax machine has not been needed or used as much. The only things the fax machine is still used for are when a scanner is not available to email a document somewhere, secure documents that need to reach a location quickly, or when a signature is required. In the future, everyone will relay documents through their smart phones. Eventually, people may even teleport and then people will no longer need to send documents.

Keys – What will you need keys for when you have pin-codes on doors, face recognition, and a chip inserted in your hand?

Jobs – The robots are taking over! Not completely, at least not yet! We will probably see higher unemployment rates due to technology, though.